tv Closing Bell CNBC September 13, 2012 3:00pm-4:00pm EDT
steadily. we're trying to provide more support for people who want to go out, buy homes, construct homes, and also those who want to refinance. it's the purchases of new homes that generate the construction activity, the furnishing, all those things that help the economy grow. >> earlier this year at one of your news conferences in this room, you said you were already hearing anecdotal information from some of your colleagues at the regional fed banks about firms, companies making decisions on hiring next year because they were afraid of the fiscal cliff or whatever the federal government was going to do in terms of cut backs. it's been a few months since you made that statement. i'm sure your staff are working hard on it, but how much of a
head wind so the economy is the fear of the federal government just sort of cutting way back following across the fiscal cliff? even if they take a few steps back from the cliff, it's still there. how much is that fear contributing to lack of growth or adequate gdp growth in the economy? >> well, you know, it's pretty hard to give you a number, but i can certainly confirm that as the reserve bank presidents and governors made their reports today and yesterday around the table, there was considerable discussion of uncertainty, including policy uncertainty, fiscal policy uncertainty and the implications of that for hiring and investment decisions. a lot of firms are waiting to see whether that problem will be resolved, and if so, how.
i think it is a concern. it is something that's affecting behavior now. s again, i don't have a number, i don't know how big that effect is. certainly the sooner that can be resolved, the sooner it can be clarified, it will be beneficial not just because we avoid the cliff itself, but because we clarify for firms, for employers and investors how that's going to be resolved. so i think it's an issue that is of some consequence, yes. >> hi, mr. chairman. how much was the fiscal cliff a decision or a factor in your decision to do an open-ended qe instead of a fixed? or a fiscal uncertainty, more generally. >> we take the economy as we find it. there are a lot of head winds right now that are affecting the
economy. there's fiscal head winds. there's international factors, including the situation in europe. there's factors arising from still impaired credit markets and so on. so we looked at that, looked at the economy from the perspective of, you know, how quickly it's been growing over the last six months to a year. and as i talked about in a speech in march, in order for employment gains to be sustained for unemployment to fall, the economy needs to grow at or above trend levels. lately it's not really been at trend. so we've been responding to that problem and trying to take steps that will assure a somewhat stronger growth and we hope will help bring unemployment down over time. now, again, the fiscal cliff, the uncertainty about the fiscal cliff is one of the factors, one of the head winds, but i'm sure
there are many others. we don't try to differentiate among them in any sense. if the fiscal cliff does occur, i suspect it won't, and i hope it won't, but if it does, and we get the kind of impact the congressional budget office is talking about, as i i've said, i don't think the federal reserve has the tools to offset that and we would have to rethink at that point. we've taken the steps we've taken now because we'd like to see the economy gather more momentum. the more momentum it has, the better placed we are to deal with any shocks that might come down the road. >> marcy gordon with the associated press. one of the aspects we've seen in recent reports on unemployment is the shrinking labor force. is that something that's of specific concern to you, and what does it tell us about the labor market and the economy?
>> you're absolutely right. as i mentioned earlier, the unemployment decline last month was more than 100% accounted for by declines in participation. some decline in participation is anticipated, as expected. we're an ageing society. we have more people retiring. female participation has flattened out. it hasn't continued to climb as it did for several decades. we're seeing less participation among younger people, fewer college students taking part-time jobs and the like. part of this decline in participation was something we anticipated quite a long time ago, but part of it is cyclical. part of it reflects the fact that some people, because they have essentially given up or at least are very discouraged, have decided to leave the labor force. the anticipation is that if the economy really were to strengthen and labor markets
were to strengthen, at least some of these poem would come back into the labor force. may might even temporarily raise the unemployment rate because they're now looking again. so the participation rate over and above the downward trend is just one of the other indicators of a weak labor mark. that's why i said earlier we want to look at a range of indicators, not just the unemployment rate, although that's a very important indicator. not just payrolls, although that also is a leadi ining indicator. but participation, hours, part-time work, and a variety of other measures which suggest our labor market is still in quite weak condition. >> okay. thank you very much. >> thank you.
>> and good afternoon, everybody. we are listening to ben bernanke on the heels of new accommodation at the federal reserve today. welcome to the "closing bell." i'm maria bartiromo at the new york stock exchange. mr. bernanke giving the markets what it wanted, saying the economy was too weak to do it on its own. >> welcome from me as well. the fed chairman wrapping up this news conference where he reiterated the central bank's key points at its latest policy meeting. the talk about $40 billion buying of mortgage backed securities. they're not going to be buying an additional treasury market securities. they're going into the mortgage-backed market at this point and trying to buck up what has been a weak part of this economy right now in the housing market. >> and the open-endedness of it also a factor here. >> they're going to monitor the economy as they go.
>> you heard him say the committee will continue to the end of the year. the program to extends the average maturity of holdings. interestingly, they said if the economy does not pick up, we'll continue with our other policy tools. when asked what those policy tools are, they said the balance sheet and communication tools. so basically talking up the market, pushing money into equities and keeping rates low long term. >> he made it very clear. the key element they're watching, the jobs market. >> absolutely. >> that has to improve before they start to scale back. it's all about jobs for the federal reserve right now. >> at the high, the market was up about 235 points. let's get back to brian shackman. he's looking at what's making the biggest moves. >> where do you start? first let's look at the big cap sectors and see which ones are up the most. you have materials, financials, energies.
almost 2% for energy. in terms of s&p 500 the highest performing stocks, just a litst of interesting names. you have mining. you have real estate. i do also want to point out that in terms of the dow jones industrial average, the top three performers are all financials. bank of america up 4.5%. some outside moves. if i went through the list of all the things hitting new highs, i would probably have to commandeer the show. >> all right, brian. thank you so much. there's a mix of opinions from wall street to washington on this latest move by the federal reserve. one opinion that matters seems pretty clear, the stock markets. they are ripping and roaring today. >> we didn't get that buy on the rumors, sell on the news. the buying continued at least today. also a reaction now on the closing bell exchange, steve liesman with us stepping out of
the news conference there. see if he's ready. he's just now getting ready. also with us today, we have nathan backrack of the network financial group. steve, your thoughts. as yo were saying earlier, the fed is essentially throwing the kitchen sink at the economy right now. >> well, no. not just the kitchen sink. you're understating my exaggeration. >> i know where you're going. i thought i'd let you say it. go ahead. >> they said they're going to throw the kitchen sink and warn that the stove and refrigerator would be next. that's, i think, when he says, look, we're not just doing mbs. if we need more, we're going to do more. additional asset purchases different from mortgage-backed securities. in the press conference, i was struck by how -- i guess the best word is populous, the chairman was. he addressed his critics, those who say that we're hurting savers. we're risking inflation. so he went right after the kind of political issue. he addressed main street. he said, hey, this is a main
street policy. it's about people getting lower interest rates. i think that he agreed with me when i asked him the question about whether or not this would mean additional tolerance for inflation, which i think is a really important issue here as to whether or not this idea of remaining easy while the recovery gathers steam. i think he said, look, if it's been lower, then we can tolerate higher. >> and the committee also anticipates inflation would run at our below the 2% objective. call me crazy, but is this all good news? given the fact we are seeing the fed throw the kitchen sink and the stove and everything else at the economy, doesn't that tell us things are pretty tough out there still? nathan, what's your take? >> absolutely. there's a total disconnect between wall street and main street. steve, you can throw the kitchen sink at it, but durable goods only last, at most, three years. none of them have in my house. gold is up because everybody knows the currencies are going down. if you like what's happened in the last couple days in
equities, sell them. i think this sugar high is not going to ly as long as it has in the past. >> they also spent a lot of time talking about fiscal policy as well and how it has not worked to this point. the fed chairman admitted they don't have the tools right now to mitigate some of the effects of the fiscal cliff. should we go over that? >> that was one of the most scarier, ominous things he said. you know, basically saying we're not equipped to deal with this. i think a perspective we've had is that, look, this has been the biggest blast. this is just a continuation of the biggest blast of monetary stimulus. it still really hasn't moved the needle. you do this, but what if this doesn't move the needle? then, does the market feel like the fed becomes prostate? we used to use the term they're out of bullets. i guess that's what we're picking up. >> rick, what's the word in chicago? one of our guests yesterday ahead of this fed decision made
an important point saying that it's going to be a buy on the new scenario because you've got huge pools of money that will chase this market into year end. you are seeing that happening today. how sustainable is it on equities? what are you seeing in the bonds pits? >> they had it right. most traders in the fixed income market have been on a steepening trade for a long time. the steepening trade worked just fine. the other big trade down here was be long gold and short the dollar. those both worked extremely well. so traders down here have been in tune. they disagree with our one guest. they agree it's a sugar buzz for stocks, but they will not fade it. i agree with that. the sugar buzz can go on a long time, as evident by ben bernanke. >> all right. thank you, all, gentlemen, for your thoughts on this important day for the markets and the economy. we'll take a break here. we've got about 45 minutes left in the trading session. we're going to see if this
market continues to power higher. right now the dow is back up 200 points. >> stick around. we're just getting started on this special fed edition of the "closing bell." still to come, fed up? why one prominent money manager says the central bank needs to reverse course on interest rates for the good of our economy. plus, getting an earful. donald trump weighs in on today's fed announcement and why he thinks we'll have an economic meltdown if the president is re-elected. also, wasted aid? is this the administration throwing away tax dollars by financially supporting unstable middle east governments? that and more is ahead on the "closing bell."
tag. take a look at the top five performers on the dow. three were financials. you now have a nine handle on bank of america. jpmorgan chase has now made up all the losses incurred post the whale trade debacle. alcoa headed back toward double digits and $10 a share. bill, back to you. >> all right. we'll be checking back with you. we continue to get reaction to the news that the fed is stepping again in a pretty big way with $40 billion a month in mortgage backed securities purchases. no end date to this point. they'll continue to monitor the economy. market likes it, even though the message is that the economy is weak and will not be creating enough jobs any time soon. >> we're going to bring back steve liesman right now. also joining the conversation, lance roberts of "street talk." gentlemen, thanks for joining us. in a couple of the reports i'm reading post the news today, some people worry that in fact this is really not going to do
much for an economy that is desperate for fiscal policy and not more monetary policy. how do you see it? >> well, i think that they're right in the sense that we have a disaster going on in washington. it's not the fed. it's the fiscal authorities. but let's think of the alternative. if the fed were not acting, that would be a big negative for the stock market. the market is up about 6.5% on fed news this year. we need help. certainly the fed can't bow out of this effort. >> and, in fact, steve liesman, one telling moment for me was fed chairman, while they are talking so much about jobs, and he said recently he felt that the monetary policy had to help to create 2 million jobs over the last few years, he admitted today that monetary policy, they don't have strong enough tools to solve the unemployment problem here in the united states. >> yeah, i agree with you on that, bill, but i just want to make a point that i've heard a lot of politicians talk about
unemployment. i've not heard any single person talk in a more impassioned way. you can agree or disagree with his prescription, but as far as i can tell, he's the only one in the political establishment doing anything about it. so i think that's an important thing. and that's one of the reasons why, you know, he feels -- he's pointing out that fed policy is not a panacea. he needs help from the fiscal side. >> how come we're not getting it, steve? is it just because washington is so broken? >> i think it's so broken, and i think no side is willing to give the other side any advantage whatsoever until the election clarifies. >> i think that's outrageous. i think that's outrageous, really. i do. >> but it's the reality we face right now. lance roberts, what strikes you about -- i mean, are you hopeful that the economy can get better as ben bernanke suggests, or are you more concerned about what the implications are for this
kitchen sink monetary policy we're getting right now that we are maybe worse off than we thought? >> well, absolutely, we are. that's what it's telling you. for my clients and for investors, this is great. it boosts the asset markets, drives stocks higher. that's great. the problem is for the rest of the economy. look what's going up today. materials, energy, gold. your basic inflationary plays. that's going to translate through to an economy that's got low employment. 14 million people since 2009 are now on food stamps. you take a look at the number of people -- we created 2 million jobs. we had 2 million people go on disability. that's not the type of employment environment we want. unfortunately, qe doesn't promote businesses to hire people. what promotes businesses to hire people is demand. >> and that's not there. in fact, rick, that's one reason why fed chairman bernanke is not concerned about inflation. yes, the monetary base is much bigger. all of the elements are there to
create inflation in the economy. the one thing that's missing is demand. do you agree? >> no. i think that we are setting up for another '70s hyperinflation. you know, just because i throw a soybean in the dirt today doesn't mean i'm going see anything grow tomorrow or the next day. but the seeds are planted. the likes of bill gross and every treasury trader i know isn't in a steepening trade -- >> hold on, rick. rick, are you saying that the drought is the result of monetary policy? >> wait, what did you say, steve? >> are you saying it's the result of the monetary policy? >> listen, all i can tell you is inflation arguments don't hold water when the velocity picks up, he won't be able to exit fast enough. i agree with mr. taylor, mr. graham yesterday. the other thing is, pushing mortgage rates low doesn't necessarily mean anybody who couldn't get a mortgage yesterday will be able to get one tomorrow. >> that means the person who's on the cusp can get it. >> we got to go, guys.
>> just like our savers didn't hold water either. >> you're not going to promote mortgage buying. >> thank you, guys. >> thanks, guys. see you soon. we have a mark that's holdingn to the gains here, up about 200 points on the tril average. off the best levels, but certainly strong market reaction here today. >> it goes without saying we'll continue to follow this rally into the close f it lasts. later, anti-american violence continues in the middle east helping to push oil prices higher. should we stop giving billions in aid to countries that hate us, especially since we've got our own fiscal problems? we'll look at that coming up. and do you know which company has done fine no matter what the fed did or didn't do? that would be apple. now the iphone 5 sparks a wave of apple price target hikes on wall street. wait until you see these target increases. we'll look at apple stock next. [ male announcer ] when this hotel added aflac
welcome back. let's look at this market as we approach the final stretch. 30 minutes until the close on wall street. dow industrial is up 198 points. that's 1.5%. volume, not great. still trading higher here in the triple digits on the heels of the qe-3 announcement we heard. s&p 500 strong, 1.5% higher, 22 points. the nasdaq also showing real strength here. leadership in technology as well as a number of economically sensitive names pushing the s&p 500 up 1.5%. bill, over to you. >> through it all, maria, apple shares continue to pop along with the rest of the market. it might have happened either way. after several wall street firms hiked their price target on apple, are we set for another
big move higher, or is it time to take some profits here? that's what we're beginning to talk about in today's talking numbers. on the technical side on apple, it's mark newton. good to see you. what do you think, neil? is apple economically immune? doesn't matter what happens with monetary policy or anything right now? >> well, i think if you look at the apple story, you know, it's got less than 10% of the worldwide hand set share. they have 18% of the smart phone market share. i call it the early stage company. there are two things you have to understand about apple. many people have criticized that some of the features are not as good as the samsung galaxy s-3 or the htc phones. you have to look at the equal system of the applications. you can't look at it purely from a hardware point of view. in other words, you have a loyal base that will upgrade. the second aspect is their
low-end market, which they have finally announced by going with free phones. they're going to put a lot of pressure on the android system. >> okay. so sounds like he likes that stock at this point. can it go much higher from these lofty levels here? >> i don't like it as much on a technical risk reward basis. i've owned the stock for most of the year. i recently sold it. >> is that right? you're out of this market. >> i'm out of it as of the last few weeks. this is why. recently you've seen a real parabollic move. recently the stock has taken out recent highs. the problem is the momentum has not followed this move to new highs. the volume has been less on this recent move to new highs than it was earlier in the spring. you're starting to see signs of countertrend exhaustion. the bottom line is that in the past this stock has never shown signs of going down until you drop to new monthly lows like we did in 2000, 2006, 2008.
for now, from a short-term technical perspective, above 685 means you get a bit over 700. i just don't like it from a technical risk-reward basis anymore. >> very interesting. thanks for your thoughts today. >> bill, thank you so much. coming up next, our next guest is soundsiing the alarm on the fed's latest move to stimulate the economy. that would be it. bob explains why the fed has it all wrong and should be raising interest rates to help the economy recover. we'll check in with him. later, should mitt romney hint that he'd fire ben bernanke if he wins presidency ? is that the right move? donald trump will weigh in. tdd#: 1-800-345-2550 when i'm trading, i'm totally focused. tdd#: 1-800-345-2550 tdd#: 1-800-345-2550 and the streetsmart edge trading platform from charles schwab... tdd#: 1-800-345-2550 gives me tools that help me find opportunities more easily.
tdd#: 1-800-345-2550 i can even access it from the cloud and trade on any computer. tdd#: 1-800-345-2550 and with schwab mobile, tdd#: 1-800-345-2550 i can focus on trading anyplace, anytime... tdd#: 1-800-345-2550 until i choose to focus on something else. tdd#: 1-800-345-2550 trade at charles schwab for $8.95 a trade. tdd#: 1-800-345-2550 open an account and trade up to tdd#: 1-800-345-2550 6 months commission-free online equity trading tdd#: 1-800-345-2550 with a $50,000 deposit. tdd#: 1-800-345-2550 call 1-866-294-5412. a short word that's a tall order. up your game. up the ante. and if you stumble, you get back up. up isn't easy, and we ought to know. we're in the business of up. everyday delta flies a quarter of million people while investing billions improving everything from booking to baggage claim. we're raising the bar on flying and tomorrow we will up it yet again. oh, hey alex. just picking up some, brochures, posters copies of my acceptance speech. great! it's always good to have a backup plan, in case i get hit by a meteor.
wow, your hair looks great. didn't realize they did photoshop here. hey, good call on those mugs. can't let 'em see what you're drinking. you know, i'm glad we're both running a nice, clean race. no need to get nasty. here's your "honk if you had an affair with taylor" yard sign. looks good. [ male announcer ] fedex office. now save 50% on banners.
ceo on tonight. you have monster beverage. cerner up 3%. some of those movers are are obviously outside of tech as well. back to you. >> thank you so much. the fed taking action today and the market certainly listening here. big rally on the heels of the qe-3 announcement. take a look at the surge in stocks. stimulus wasn't the only thing ben bernanke delivered on. he also reaffirmed the need to keep rates exceptionally low to jump start the ailing economy. >> healthy investment returns cannot be sustained in a weak economy. of course, it's difficult to save for retirement or other goals without the income from a job. thus, while low interest rates do impose some costs, americans will ultimately benefit most from the healthy and growing economy that low interest rates help promote. >> veteran money manager bob olstein says the fed has it all wrong and we need to raise rates now. he's here to make his case in
that regard. you're among those who feel that for a lot of reasons low rates are going to hurt the economy more than they're going to help. >> absolutely. you need good bank spreads. that's why they're not making money. by the way, i agree with what he did today. treasury rates did jump a little bit in the longer mark. we think, also, there's a crisis in confidence. that's the major problem. we need to get some confidence by business people. all of the money is there. it's at the banks. it's in the corporations. investors have the money. nobody's spending it. we have regulatory issues. >> so do you agree with what the fed did, or you do not agree? >> i do agree. >> you just said they should raise rates. >> no, no, no. i didn't say they should raise rates. i said we need higher rates. we need rates to increase -- >> how are we going to get higher rates if they don't raise rates? >> you need to get the economy turned around. you need businesses to spend money. he went after the mortgage
market. treasury rates improved today. >> that's at least today. but you know they're going to be in there with more operation twist noun try and lower the long-term yields right now. they're going to add to their own balance sheet to keep those rates low. >> i understand that. but the reason you have low rates right now in addition to the fed is there's a crisis in confidence. no one know what is the tax policy is. nobody know what is the health care policies are. nobody knows regulatory. how are businessmen going to start to spend money that they have? >> so isn't your problem more with congress and the fiscal cliff than it is the monetary policy? >> absolutely correct. that's where my problem is. that's where rates -- when the economy starts to turn, and it's moving up. it's just moving up at a very low rate. i don't want to say -- we're not in a depression or recession like the stock market is acting where you're getting 10% free cash flow yields on some of the biggest and best companies in the world. don't misunderstand.
i think stocks are cheap here, especially in a 2% interest rate environment. >> zero in on how you take advantage of that. are you of the belief that more money keeps chasing this market and it keeps going higher to year end, or is this a short-lived move? >> i believe the market is going to show high single-digit returns going forward. i believe it is 15% under valued. i think everybody is in the now. the rapid traders, the analysts. >> very headline driven. >> it's crazy. getting value players like us when we could buy a cisco. i laughed at cisco. i said they to get routers in mars back in 2011 to justify the price. here's a company with $4 in cash, 9% free cash flow yields, and basically you need to get the increase in bandwidth. people are missing the point. this stock market, which is so terrible, we're up 15% this year. the markets doubled since --
>> march of '09. >> and everybody's still crying. the public's going to get back in 12 to 18 months when it's significantly higher. >> this period of time right now remiep reminds me a lot of the early 1980s when we had tremendous apathy from the public. everybody was scratching their head. >> would you have bought stocks in march of 2009? i had $400 million in outflows out of my fund in march of 2009 at $6. my fund closed at $13.70. they say we're going lousy. it's unbelievable. >> here's the thing though. >> it was the bottom. >> the life blood of the stock market is going to be profitability in corporate america. right now profits are growing very slow. that growth rate is slowing down. >> it's supposed to go negative next quarter. >> we've had plenty of ceos come through who are wringing their hands over the slowdown in europe, the slowdown in asia, and our problems here. >> let me ask you a question.
why is the market selling at 13 times earnings? in essence, market is a discounting mechanism. the fact that everything is growing slowly, the s&p earnings are supposed to be $105 this year. my god. if you just give that a 15 or 16, you got 10% right there. you can't be market driven. this is market of stocks. you can buy microsoft, intel. i know about this pc junk. this is the fifth death of pcs. >> would you buy apple at this level? >> we own apple. we've trimmed it. it's getting to the point where it's still undervalued. basically, what i am saying is here's an analyst coming out tomorrow or two days ago saying amazon's cheap because it's going to earn $2 a share next year at $300 a share. so it's a tale of two markets. there's a lot of value in there in free cash flow companies yielding. that's where you're going to make the money.
>> can you blame the small investors for avoiding this market though? with all of the volatility, all of the problems we have in the economy right now. let me ask you this, what could go wrong with your forecast? >> a lot of things could go wrong. they don't solve the fiscal cliff. europe does the wrong things, terrorists attack. >> aren't those all realistic possibilities? >> i'm talking about things you can control. >> do you want the sure thing? how do you get it? i want the sure thing too. so guarantee me that -- so when you invest in the market, if you have the potential to make 15% rather than 2%, i think risk is in the bond market. that's where all the money is going. does that tell you anything? >> yeah, i know. good to see you, robert. thanks so much. don't go away. a lot more ahead with the markets all rallying sharply here in the home stretch. dow industrial is up 217. should you buy into the fed effect, or is this a sell on the news event? also after the bell, the chairman of one of the largest
independent investment banks gives us his side on the fed's move. what's truly amazing about mercedes new mbrace2 system... is i can follow all my sports... catch the latest breaking news... keep in touch with friends... follow the financial headlines... find a great restaurant... and with siriusxm i can get weather forecasts... all from here. in my mercedes-benz. [ male announcer ] introducing mbrace2. the most comprehensive cloud-based telematics system on the road.
it's your world, from your car. mercedes-benz. the best or nothing. exclusive to the military, and commitment is not limited to one's military oath. the same set of values that drive our nation's military are the ones we used to build usaa bank. with our award winning apps that allow you to transfer funds, pay bills or manage your finances anywhere, anytime. so that wherever your duty takes you, usaa bank goes with you. visit us online to learn what makes our bank so different. looking for a better place to put your cash? here's one you may not have thought of -- fidelity. now you don't have to go to a bank to get the things
you want from a bank, like no-fee atms, all over the world. free checkwriting and mobile deposits. now depositing a check is as easy as taking a picture. free online bill payments. a highly acclaimed credit card with 2% cash back into your fidelity account. open a fidelity cash management account today and discover another reason serious investors are choosing fidel welcome back. a rally fueled by the fed action
today as they announce qe-3 plus if you want to call it that. what steve liesman is calling kitchen sink monetary policy. the dow is up 217 points with a gain of 1.6%. the s&p up 1.7% at this hour. let's go to phil. he has news at this hour on general electric. phil. >> we're watching shares of ge. the company is doing an inspection of all of its genex aircraft as another engine failed. it was the failure in july that prompted the ntsb to prompt an investigation. this includes ge checking out all of these that have been delivered, 118 around the world. we'll keep tracking the story. >> phil, thank you. you remember the famous kinks album "give the people what they want"? that's your favorite. in fact, we have the cover right there.
today the fed -- a cultural segue. the fed gave the stock market what it wanted. open-ended free money. >> absolutely. with us today to talk more about it, steven gallagher. we are rejoined by rick santelli. you say this move by the fed makes another downgrade of the u.s. more likely. >> yes, it does, for the simple reason that we're not solving the underlying problems. the debt to gdp for the u.s. has increased from about 73% as of four years ago to roughly 104% today. you have to back off and wonder where the injection of additional money in this system really solves the underlying problem, whether it really enhances credit quality. history has shown that injecting money doesn't do it. >> rick, you have got a question. >> well, pretty much my question
was, you know, on tuesday they reaffirmed the aa rating in a negative outlook. it's fairly similar to maria's question. we have qe. should we be expecting an evaluation of possibly an actual downgrade soon? >> we are going to be looking at it over the next couple days, possibly even tomorrow and see whether it tips it over the edge. we've had a negative watch on the u.s. for some time. we downgraded it early last year. we downgraded it again earlier this year in april. the question is whether or not this is going to solve the underlying problem. that is a heightened debt to gdp, which isn't just a problem in the u.s. in fact, it's a problem throughout the western world. but obviously we're talking about the u.s., and that's the most important. >> thanks. >> does this change the way you invest, steve, given what the fed did today? how do you change your allocation? >> we put on a pretty strong reflation trade about a month ago. i think we're fully convinced now they will reflat the economy
and that hard assets will go up, including stocks. we have greater conviction in some of our commodity investments. a lot of the move might be in the stocks. we might need to digest it. >> this is a change in tone for you now. >> i feel stronger. we bought a lot of financials a few months ago. they've been up huge. bank america is a great example of that. i think we're seeing it. i think investors have yet to fully shift to the reflation mode. i think you have to buy stocks and hard commodities. >> and also real estate? >> there's been a lot of talk on real estate. the fed is in there buying mbs, the lower rates, to make housing more affordable. i think people are missing that it probably won't move it much. there is inflation and the cost of caring for a house, maintain it. i don't think it will have that much of an impact on housing. >> steven gallagher, what do you make of today, and what are you going to do with that portfolio? >> we're going to bask in some profits for a while. we were also looking for some positive mood on this.
i think it immediately makes us a little more cautious. some of the good news is out of the way. we have profits it look forward to now and the fiscal cliff. six months, a year from now, we're very much in that reflation trade. the real estate, you can play that on the home builders as well. it's a small sector, but it's one that should do well. consumer discretionary overall, consumers are in decent shape. they're showing more fire power. i'm encouraged on that. >> bob, we didn't get the sell on the trade news we were expecting. >> the ultimate thing that would have mattered, which is the open-ended commitment. this is qe forever. bernanke emphasized he's going to continue easing even as the economy improves. he said he would continue easing if they went over the inflation targets a little bit. qe is going to be with us for a long, long time. you can see the heavy volume we're having here today. >> you want to peel back on some financials, steve? >> we were thinking about it
yesterday. thank god we didn't. we have a big overweight position. interestingly enough, most other managers are significantly underweight. you could have a melt up situation in financials. bank america could go up another 10 or 20% in the next month. >> thanks, guys. appreciate it. see you soon. >> the federally continues today. we'll be taking you to the market close. the final few minutes can tell an important story on how much conviction there is in this rally. later, a new report shows lax oversight is moving social security's move to bankruptcy. how big of a problem is this? be prepared to get angry. back in a moment.
in communities across the country. whether it's supporting a delaware nonprofit that's providing training and employment opportunities, investing in the revitalization of a neighborhood in the bronx, or providing the financing to help a beloved san diego bakery expand, what's important to communities across the country
welcome back. market up 207 going into the close. let's go back to brian. he's looking at sectors. >> as we head into the close, just want to review what the top sectors are. every single s&p large cap sector is up at least 1%. these are your three best. the financials have caught up to materials. they're neck and neck for tops. you have s&p energy up almost 2%. as a sector perspective, bill, even though the market is not much higher, these three sectors have gotten a little stronger as a group. back to you. >> we are getting stronger into the close here.
the dow up 205 points. we want to point out, fed chairman bernanke said there are no specific economic or unemployment targets that the central bank is looking for to determine when to stop the stimulus programs that they announced today, but he did give investors an idea of what kind of economic conditions the fed hopes to see before it stops easing. >> what we've seen the last six months isn't it. we're looking for something that involves unemployment coming down in a sustained way, not necessarily a rapid way, because i don't know if our tools are that strong. but we'd like to see an economy which is strong enough that it will support improving labor market conditions and unemployment that's declining gradually over time. >> going to keep rates exceptionally low until mid-2015 instead of the earlier comment of late 2014. that's also anotheri
indicatining this is what they think. >> i'm struck by the number of times he referred to the jobs market. the fed's mandate is to maintain price stability. that ifs what they're after. the jobs market is one subset of that. that's what they're focusing on now like a laser beam. i think his message is there's only so much we can do about jobs. it's up to congress now. that's something we talked about. >> fiscal policy. we just don't have it. it's really frustrating to see it's all on the fed in terms of getting us out of this slow period for the economy. i don't know. they said they have more tools. they said balance sheet changes, expanding the balance sheet, obviously, as well as communication tools. talking the market up, talking the economy up. >> which they have done. >> and will continue to do so. when you say they may be out of bullets, there's some truth to that. >> i think tellingly he did say he suspects that congress will solve the fiscal cliff crisis.
you watch. >> i give up. >> oh, you're the one fife months ago was convinced it was going to happen before the election. now you've given up completely. >> i'm done. uncle. >> i'm still hopeful. it'll happen. it's going to be ugly, but it will happen. we'll take a break. we'll have the closing countdown. >> then we have donald trump's reaction to the fed's move today. would he fire ben bernanke if he were sn were president? wait physicuntil you hear this . and the next. there's cash flow options from pnc. solutions to help businesses like yours accelerate receivables, manage payments, and help ensure access to credit. because we know how important cash flow is to reaching your goals. pnc bank. for the achiever in you.
oh, hey alex. just picking up some, brochures, posters copies of my acceptance speech. great! it's always good to have a backup plan, in case i get hit by a meteor. wow, your hair looks great. didn't realize they did photoshop here. hey, good call on those mugs. can't let 'em see what you're drinking. you know, i'm glad we're both running a nice, clean race. no need to get nasty. here's your "honk if you had an affair with taylor" yard sign. looks good. [ male announcer ] fedex office. now save 50% on banners.
a short word that's a tall order. up your game. up the ante. and if you stumble, you get back up. up isn't easy, and we ought to know. we're in the business of up. everyday delta flies a quarter of million people while investing billions improving everything from booking to baggage claim. we're raising the bar on flying and tomorrow we will up it yet again. on december 21st polar shifts will reverse the earth's gravitational pull and hurtle us all into space. which would render retirement planning unnecessary. but say the sun rises on december 22nd, and you still need to retire. td ameritrade's investment consultants can help you build a plan that fits your life. we'll even throw in up to $600 when you open a new account or roll over an old 401(k). so who's in control now, mayans?
okay. three minutes left in the trading session. want to go over what happened today when the fed announcement was made. this is very interesting. this is the dollar index. this is the first most sensitive indicator when the fed announcement came out. in fact, it even went lower before the announcement. they were anticipating that you were going to get some sort of form of quantitative easing. a little stutter step and sharply lower. we're at seventh month lows against the yen. we're at four-month lows against the euro regarding the dollar. when the dollar goes lower, what goes higher? hard assets, gold. it continues that six-month
high, up $34. almost a 2% gain for the price of gold today. now at $1767. oil higher. the middle east tensions don't help. we are creeping toward $100 here in new york. they're still well above that in london right now with a gain of 1% in new york. as for the other markets today, look at that. what got lost in all this was a very strong auction for 30-year treasury bonds. the demand was very high at that yield. it brought some of the yields lower today. we are finishing lower on the ten year at 1.73%. as for the stock market, as the euro goes higher, so does our market. pretty good gains here today. 1.4%. now to 13,520 on the dow. the sectors are going to look very familiar again. materials pinned to the top there as the dollar goes lower. financials, energy, consumer staples and technology. kenny, you are skeptical of this market rally.
>> absolutely. listen. i think all it really says, all ben bernanke said today was it's not pretty. this situation is not pretty, so we're going unlimited, here you go, anything you need. they're worried about the end of the year. they're worried about everything else. germany took some of the pressure off, so i actually thought he was not going to do this. >> you're feeding into this rally? >> absolutely. i think the reaction today is way overdone. >> you're doubling down though. what are you buying here? >> you got to think about that next trade. financials have done well. they'll probably continue to do better. groups that have lagged, specialty retail. we're buying specialty retailers that have lagged. we're buying express. we're buying aeropostale. i would be buying those three names in a basket. >> all right. thank you, gentlemen. love it when there's a difference of opinion. that's what makes the market. >> absolutely. >> love it. >> thank you for joining us. all right. a gain of about 200 points here for the dow industrial average. we're at a fiveea